Texas Instruments Gives Strong Forecast on Automotive Demand

(Bloomberg) -- Texas Instruments Inc. projected revenue for the fourth quarter that will top analysts’ estimates, indicating demand for chips used in cars and personal electronics is rebounding.

Sales will be $3.41 billion to $3.69 billion and profit is expected to be $1.20 to $1.40 a share, the company said Tuesday in a statement. On average, analysts predicted profit of $1.20 a share and sales of $3.35 billion, according to data compiled by Bloomberg.

Sales of chips used in vehicles have risen back to year-ago levels, helped by the reopening of auto plants in North America and Europe, Texas Instruments executives said. Increased consumer spending on home electronics such as smart speakers and televisions has helped boost demand for semiconductors that power those devices. Industrial demand remains mixed, the company said.

Texas Instruments has more than 100,000 customers, which make everything from consumer electronics to space hardware. That breadth makes its earnings and forecasts a proxy for demand across the economy.

“We remain cautious -- this economy is not in good shape,” Chief Financial Officer Rafael Lizardi said in an interview. “The long-term secular trends are awesome, but could we hit an air pocket at some point in the next quarter or two or three? Absolutely.”

Texas Instruments reported a large jump in revenue versus expectations in the third quarter by using inventory it had accumulated while keeping factory production high, he said. The company has the cash flow to continue to do that and invest in new facilities and products, he said.

The results buttressed projections from some analysts that more orders for chips used in cars and factory machinery would help stem the company’s revenue decline even as the Covid-19 pandemic drags on. Still, others have expressed concerns that the bump is coming from electronics makers stocking up on inventory to guard against future supply disruptions rather than to meet surging demand. Lizardi said Texas Instruments’ customer base is made up of too many small companies for it to know if some are building supplies.

Separately, Texas Instruments halted shipments Sept. 14 to Huawei Technologies Co. to remain in compliance with U.S. restrictions on supplying the Chinese company. Huawei accounted for about 2% of Texas Instruments revenue in the third quarter and the U.S. company is assuming that will go to zero in the current period.

In the third quarter, net income fell to $1.35 billion, or $1.45 per share, from $1.43 billion, or $1.49, a year earlier, the Dallas-based company said. Revenue was little changed at $3.82 billion, topping analysts’ average estimate of $3.45 billion.

Shares gained about 1% in extended trading after closing at $150.83 in New York. The stock has increased 18% this year, lagging behind the Philadelphia Stock Exchange Semiconductor Index, which has jumped 29%.

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